|
|
|
Posted 29 August 2006. Crop Management. High Irrigation Prices Today May Give Way to Profits Next Year Texas A&M University coals.tamu.edu Amarillo, TX (August 15, 2006) - Producers pumping irrigation water this year might have a hard time seeing any profits, but the long-term forecast looks more promising, a Texas Cooperative Extension specialist said. Dr. Steve Amosson, Extension economist in Amarillo, called the current situation of high natural gas prices the "darkness before the light."
Natural gas prices have made irrigation and fertilizer prices skyrocket, taking most of the profitability out of farming, Amosson said, speaking at the recent North Plains Research Field 2006 Ag Day. The event was sponsored by the Texas Agricultural Experiment Station and Texas Cooperative Extension. But federal government analysts say natural gas prices should be headed lower, he said. While near-term futures prices don't hold any promise – at $7 per million cubic feet this month and climbing to $11 per million cubic feet in December futures – the further-out futures suggest natural gas prices should be headed down, he said. The July 2007 futures is trading at $8.50 per million cubic feet, July 2008 is at $8 and the July 2009 contract is at $7.55. The change is expected because of adjustments in the natural gas industry, Amosson said. Many of the new power plants are switching from planned natural gas power to be coal-fired. "Also, the natural gas people are seeing these historically high rates and are speeding up the development of liquid natural gas importation facilities and the development of offshore, deep-water natural gas wells," he said. Natural gas companies are re-investing their profits and developing unconventional sources, such as coal-bed methane, tight sandstones and gas shales. "This all adds to supply," Amosson said. "The more they supply, the more it will start bringing down the natural gas prices and that is beneficial to our producers, who can look for lower irrigation fuel costs and fertilizer prices." At the same time, drought is forcing wheat prices higher, and a growing demand for feed grains such as corn and grain sorghum for the ethanol industry is driving commodity prices up, he said. This market situation may give producers a chance to make some money for the first time in a long time, Amosson said. Forward-thinking producers who can lock in some higher commodity prices can look at a profit if this scenario plays out. "I think there is a probability that we could actually make some money next year," Amosson said. "If it rains, that is." Contact: |
